Diversity, Equity and Inclusion (DEI) initiatives have been at the forefront of corporate strategies in recent years. However, amidst economic uncertainties and changing priorities, DEI efforts have faced significant setbacks. This blog delves into why DEI, once on the rise, is now on the decline.
The Fair-Weather Friend Syndrome
Amid economic uncertainty, many companies have demonstrated a lack of consistent commitment to DEI. Facing challenges, they have often reduced resources, dismissed Chief Diversity Officers and significantly cut DEI budgets, thereby undermining previous advancements. Culture Amp’s 2024 report on Workplace Diversity, Equity and Inclusion highlights this troubling trend. The report aggregates data from nearly 400 companies and 175,000 employees in the US, revealing that 71% of HR professionals reported their organisations extended DEI efforts beyond basic compliance in 2021, but this number dropped to 60% in 2023.
The Impact of Leadership Support
DEI leadership roles have also seen a significant decline. In 2021, 56% of organisations had a leadership role dedicated to DEI, but this dropped to 41% in 2023. Without internal champions, overall support from senior leadership wanes, making it difficult to sustain momentum in DEI initiatives. The number of companies hiring external DEI consultants also fell from 66% in 2021 to 47% in 2023. The absence of robust leadership and the necessary expertise hampers the development and implementation of effective DEI strategies.
The Role of Data in DEI Initiatives
Data is crucial for driving DEI efforts, yet many organisations lack the necessary metrics to make informed decisions. In 2023, 42% of organisations reported that they don’t have or report on DEI metrics at all. Without data, tracking progress, making data-driven decisions and gaining executive support becomes challenging. Addressing these data gaps is essential for understanding the impact of DEI initiatives and fostering continuous improvement.
The Business Case for DEI
Despite these setbacks, the business case for investing in DEI remains strong. Companies that hire DEI consultants scored 8% higher on building diverse teams. Employees who strongly believe their company values diversity are 84% engaged, compared to just 20% engagement among those who strongly disagree. Employees who feel their organisation doesn’t value diversity are more than three times more likely to leave within a year. Additionally, companies that prioritise diversity have a 6.8% higher stock price than those that don’t.
According to McKinsey & Company‘s 2023 report, companies committed to diversity show a 39 percent increased likelihood of outperformance for those in the top quartile of ethnic representation versus the bottom quartile. The penalties for low diversity on executive teams are also intensifying. Companies with representation of women exceeding 30 percent (and thus in the top quartile) are significantly more likely to financially outperform those with 30 percent or fewer. Similarly, companies in the top quartile for ethnic diversity show an average 27 percent financial advantage over others. Meanwhile, those in the bottom quartile for both (ethnic and gender diversity) are 66 percent less likely to outperform financially on average, up from 27 percent in 2020, indicating that lack of diversity may be getting more expensive.
These statistics underscore the importance of robust DEI actions for overall organisational success.
Addressing the Challenges: A Roadmap for Improvement
To rebuild and enhance DEI efforts, organisations need to address the identified challenges strategically. Here are some key steps:
- Invest in DEI Expertise
Hiring or retaining DEI consultants and professionals is crucial. These experts bring valuable insights and strategies that can help organisations navigate the complexities of DEI initiatives effectively.
- Strengthen Leadership Support
Leadership buy-in is essential for the success of DEI programmes. Organisations should ensure that senior leaders are committed to DEI, visibly support these initiatives and integrate DEI goals into the overall business strategy.
- Leverage Data and Metrics
Implementing robust DEI metrics allows organisations to track progress, identify areas for improvement and make data-driven decisions. Regular reporting on DEI outcomes can also help in gaining and maintaining executive support.
- Foster an Inclusive Culture
Creating an inclusive culture requires more than just policies; it involves changing behaviours and mindsets. Organisations should focus on continuous DEI training, promoting inclusive behaviours and ensuring that all employees feel valued and included.
- Engage Employees
Employee engagement is key to successful DEI initiatives. Involving employees in the development and implementation of DEI strategies can enhance their commitment and ensure that the initiatives are relevant and impactful.
Global Perspectives on DEI
The decline in DEI efforts is not isolated to a single region but is a global phenomenon. For instance, in the UK where the vast majority of HR Directors believe DEI is highly valued, they also admitted that it’s the first thing to go when budgets are slashed as organisations grapple with economic challenges. Similarly, in Australia, there has been a noticeable decline in the hiring of DEI consultants and a reduction in DEI-focused roles within organisations. According to a report in 2023 by the Australian HR Institute (AHRI); there is a clear gap between employer awareness, intent and action. The vast majority (84%) of HR professionals say that DEI is critical to the future success of their organisation. However, only half (50%) of HR professionals say that their leaders see DEI as a priority for their organisation, while a similar proportion (49%) of HR professionals also that say that their organisation is not placing enough focus on DEI. These trends highlight the widespread nature of the issue and the need for a concerted effort to revive and sustain DEI initiatives globally.
Conclusion
The current economic climate has posed significant challenges to DEI efforts worldwide. However, the importance of DEI in fostering a productive, innovative and engaged workforce cannot be overstated. Organisations must recognise the value of DEI and take strategic steps to overcome the identified challenges. By investing in DEI expertise, securing leadership support, leveraging data, fostering an inclusive culture and engaging employees, businesses can rebuild their DEI momentum and ensure long-term success.
